China Huishan Dairy’s Four Independent Directors Resign

(Beijing) — China Huishan Dairy Holdings Co. said its four independent non-executive directors resigned as the fallout continues from its Hong Kong-listed shares falling 85% in one day and its treasurer disappearing.

The resignations became effective Friday, and all four independent directors cited other commitments as their reason for quitting, according to a disclosure filed to the Hong Kong Stock Exchange. The company said it is in the process of finding replacements as soon as possible.

Huishan is the largest dairy producer in China’s northeastern region. It survived a short-seller attack last year and has maintained debt relations with more than 70 financial institutions, including some of the country’s biggest commercial banks, including the Bank of China.

On March 23, the day before Huishan Dairy’s shares plummeted, company Chairman Yang Kai said that the dairy producer had a “broken capital chain,” and he would seek to raise 15 billion yuan ($2.2 billion) to solve the liquidity crisis by selling company equities to new strategic investors, people with knowledge of the matter told Caixin.

Meanwhile, the company has been unable since March 21 to contact Ge Kun, who oversees the treasury and cash operations of the company and its subsidiaries. In the latest stock exchange filling, the company said it will need more time to verify its financial position.

On the same day that Huishan Dairy’s shares plummeted, about 250 million of its shares held by Champ Harvest Ltd, a firm controlled by Yang Kai, were sold shortly before trading was halted, at a mere 39.4 Hong Kong cents (5.1 U.S. cents) per share. That lowered Champ Harvest’s equity stakes in the company to 70.76% from 72.62%, according to a notice disclosed by the Hong Kong Stock Exchange.

Some analysts said it would be unusual for Yang to sell shares after a stock’s price dropped dramatically. Instead, it is possible that some banks sold the shares that were pledged as collateral to obtain loans, they said.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)